Gold: Cheap as Chips...?

"...Might the seasonal shape of the gold price turn this summer's collapse
into an autumnal boom...?"

THE SHARP DROP in world gold prices starting in late July knocked the
cost of physical metal more than 20% off its record top of mid-March at last
week's low point.

That level - just above $750 per ounce - also happens to sit right where the
uptrend starting in Sept. 2005 now lies. Meaning, for technical analysts at
least, either a test (and perhaps collapse) of the bull market...or a screaming
opportunity to Buy Gold on the cheap.

Whichever way prices now move from here, however, it's worth considering the
typical shape of a year in the life of the gold market.

As this chart shows - swapping the Dollar for British Pounds Sterling, to
remove the impact of the Dollar's 30% drop on the foreign exchanges - the past
10 years have seen the Gold
Price follow a clear and regular pattern.

There have been exceptions, of course - most notably 2003 and 2006 - when
the "summer lull" that followed a sharp rise failed to match those high prices
again by late-autumn.

But in the main, and with a near-tedious rhythm, the price of Gold has
risen in spring, slipped back or steadied in summer, and then enjoyed very
much sharper gains once more, before the next year really gets started.

CAVEAT INVESTOR: There are no guarantees this shape could be repeated
this year. With the Gold
Price falling so far, so fast, from its recent all-time record highs, sentiment
amongst professional and institutional traders has clearly turned against the
metal.

Gold buying by the world's No.1 buyers, meantime, has indeed collapsed, with
imports to India dropping by 47% in the first half of 2008 from the same period
last year. Indian gold buyers tend to account for the surge in physical buying
seen during the autumn, as their festival season culminates in Diwali, the "festival
of lights".

Diwali falls at the end of October this year. Reports out of India say the
recent sharp falls in Gold Prices has already led to strong investment and
jewelry demand. And here in the West, the economic background remains very
bullish for Gold - at least according
to history.

US interest rates now lag inflation in the cost of living by more than 3%.
A mountain of leveraged debt still teeters above Manhattan and the City of
London. Government debt is rising worldwide, with a true "monetization" of
bad loans at Freddie Mac and Fannie Mae now only a few weeks or months away.

If you thought about Buying Gold but
were deterred by this spring's sudden high prices, it may be worth noting that
the Case
for Gold remains as it was. Too much debt, plus too much inflation, threatens
to destroy the value of savings and wealth held in paper (whether in bonds,
cash or equities). Physical gold, in sharp contrast, cannot be created at will.
Owned outright - in your name alone - it's also no one else's liability or
promise to pay.

Professional gold bars, stored securely and at very low cost in - say - Zurich,
Switzerland, also represent one of the world's deepest and most liquid capital
markets. That's simply not true of Gold
Coins.

And it's worth noting, perhaps, that if the coin and small bar market can
hit sudden supply problems like the Current
Squeeze even as prices are falling, just what might become of liquidity
- the ability to sell quickly for full value - when private investors come
to sell en masse...?

Formerly City correspondent for The Daily Reckoning in London and head of
editorial at the UK's leading financial advisory for private investors, Adrian
Ash is the head of research at BullionVault,
where you can buy gold
today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the
secure, low-cost gold and silver exchange for private investors. It enables
you to buy and sell professional-grade bullion at live prices online, storing
your physical property in market-accredited, non-bank vaults in London, New
York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people
from 97 countries used BullionVault,
owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical
silver (US$129m) as their outright property. There is no minimum investment
and users can deal as little as one gram at a time. Each user's unique holding
is proven, each day, by the public reconciliation of client property with formal
bullion-market bar lists.

BullionVault is a
full member of professional trade body the London Bullion Market Association
(LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious
Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development
body the World Gold Council (www.gold.org)
joined with the internet and technology fund Augmentum Capital, which is backed
by the London listed Rothschild Investment Trust (RIT Capital Partners), in
making an $18.8 million (£12.5m) investment in the business.

Please Note: This article is to inform your thinking, not lead it.
Only you can decide the best place for your money, and any decision you make
will put your money at risk. Information or data included here may have already
been overtaken by events - and must be verified elsewhere - should you choose
to act on it.